CWS: 1st Quarter 2024 Portfolio Review

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Market Review

The stock market ended 2023 on a strong note, and I’m pleased to see that the rally lasted into the beginning of 2024.

There is one notable wrinkle. During the final two months of 2023, interest rates were falling. Bond investors had been expecting an interest-rate cut from the Federal Reserve, and it appeared as if the Fed was ready to oblige them. In fact, investors were expecting several rate cuts.

However, right at the turn of the year, long-term interest rates started to climb. This wasn’t a dramatic turnaround, but it was a slow and steady increase in rates. The about-face probably suggests that the Fed will act more cautiously than originally expected.

Indeed, the stock market is acting better. While inflation has subsided, the last remnant is stubbornly hanging on. The Fed has been very clear that it aims to get inflation back to its target of 2%. It seems it’s not so hard to get it from 9% to 3%, but getting from 3% to 2% is apparently quite difficult.

Performance Review

​The AdvisorShares Focused Equity ETF (CWS) did well during the first quarter of 2024. The traded shares gained 6.93% (market), while the Net Asset Value (NAV) increased by 7.31%. CVS retains its overall five-star Morningstar rating for the Mid-Cap Blend category out of 392 funds for 3/31/2024.*

In comparison, the S&P 500 gained 10.16% during the first quarter, 10.56% including dividends. I should add, however, that CWS displays much less volatility than the overall market.

* CWS is among 392 funds in the Mid-Cap Blend funds category derived from a weighted average of the fund’s three-, five- and 10-year (if applicable) risk-adjusted returns as of 03/31/2024. CWS was rated 5 stars out of 392 funds for the three-year and 5 stars out of 360 funds for the five-year periods. Past performance is no guarantee of future results. Ratings reflect fee waivers in effect; in their absence, ratings may have been lower.

Portfolio Review

As usual, CWS does no trading during the year. All 25 positions are in set stone at the end of the year, and we can’t make any changes for the next 12 months. At the end of 2023, we dropped six stocks from the portfolio. The six stocks were Carrier Global, Danaher, Middleby, Stepan, Trex and Veralto. Normally we drop five stocks, but we got an extra stock last year when Danaher spun off Veralto.

Our five new stocks are American Water Works, Amphenol, Farmer Mac, McGrath RentCorp and Rollins. We were especially fortunate this year because McGrath RentCorp got a generous buyout offer in January.

McGrath RentCorp Gets Bought out

On January 29, WillScot Mobile Mini Holdings (WSC) reached a deal with McGrath RentCorp (MGRC) to buy out the latter for $123 per share. WillScott describes itself as “a leader in innovative temporary-space solutions.” McGrath is one of our new buys this year. The deal is expected to close during the second quarter of this year. WillScot merged with Mobile Mini a few years ago.

Here are the details. McGrath shareholders have a choice. For each share of MGRC they own, they can either get $123.00 in cash or 2.8211 shares of WillScot Mobile Mini. However, shareholders may run up against limitations, since the entire deal is to be 60% cash and 40% stock.

In the press release, the companies spell out the benefits of the deal.

  • Highly complementary businesses with diversified customer segments: The acquisition brings together two complementary businesses, enhancing diversity across customer segments. The combined company’s broad offerings, attractive unit economics and long rental durations underpin its uniquely predictable recurring cash-flow profile. On a pro forma basis, approximately 90% of combined total revenue is derived from leasing and related services, while the addition of Enviroplex expands WillScot Mobile Mini’s permanent modular capabilities.
  • Operating synergies with a high confidence of realization: $50 million of run-rate operating synergies are expected to be achieved within 24 months of closing. Confidence in targets is reinforced by WillScot Mobile Mini’s long history of successful M&A integrations.
  • Increased scale allowing accelerated rollout of growth initiatives: The combined customer base and rental fleet represent an expanded platform for the rollout of WillScot Mobile Mini’s strategic levers, such as Value-Added Products and Services, cross-selling and commercial best practices, and operations excellence. Together, these provide a clear path to multiple years of sustained growth and margin expansion.
  • Strong financial position underpins reinvestment in growth: The combined company’s strengthened financial profile, enhanced cash generation and de-leveraging capability, and disciplined capital allocation amplify WillScot Mobile Mini’s ability to reinvest in growth and compound returns.

This is a big win for us. McGrath shareholders will ultimately own 12.6% of WSC. Hopefully, the deal will be completed by the end of June 2024.

Our Big Winners during Q1

Another big winner for us this year has been Cencora (COR). In January, the company reported that it topped Wall Street’s earnings forecast by more than 13%. The company also raised its guidance, and the shares jumped 5.5% to reach a new all-time high. For Q4, the company increased its earnings per share (EPS) by 21% to $3.28. That was 39 cents above Wall Street’s forecast. Not bad.

Last October, Cencora offered initial guidance for this year of $12.70 to $13 per share. I said that was too conservative, and I expected to see it increase gradually this year. Well, I was right. Cencora increased its fiscal-2024 outlook to a range of $13.25 to $13.50 per share. Cencora is one of our top performers so far this year.

Our most impressive stock to report was little Miller Industries (MLR). Miller had given us a preview of its earnings report, so we knew the numbers were going to be very good. Then we got the official numbers, and they were very, very good.

Let’s run through the details. For Q4, Miller had revenue of $296.2 million. That’s up 31.2% over last year’s Q4. The company said the increase was due to “continued strong order trends and execution against the Company’s near-$1 billion backlog in the form of improved deliveries of finished goods to customers.”

Miller’s gross margin increased from 11.3% last year to 13.0% now. Net income increased 80.2% to $16.7 million. For Q4, Miller earned $1.45 per share, compared with 81 cents per share one year ago.

For all of 2023, Miller had revenue of $1.15 billion. If you recall, the company had a goal this year of reaching $1 billion in sales. They made it with plenty of room to spare. Last year, Miller’s EPS increased 186.5% to $5.07 per share. The stock is still going for less than 10 times earnings.

Miller also increased its quarterly dividend by 5.6% to 19 cents per share. Based on the current share price, the yield works out to about 1.5%. I expect to see more good news from Miller this year.

Stryker (SYK) has also done well for us. The company said that its Q4 earnings increased 15.3% to $3.46 per share. That topped Wall Street’s consensus by 19 cents per share. The company had been expecting $3.21 to $3.31 per share.

Q4 was a very good quarter for Stryker. Organic sales rose 11.4%, and the company’s operating margin hit 27.2%. For the year, net sales increased 11.1% to $20.5 billion, and EPS grew 13.5% to $10.60 per share. For context, Stryker’s 2023 guidance had been for $10.35 to $10.45 per share.

For 2024, Stryker expects organic-sales growth of 7.5% to 9.0% and EPS between $11.70 and $12.00. That’s a bold forecast. Wall Street had been expecting $11.56 per share for 2024. Shares of SYK got a nice bounce after the report came out. I think this will be another strong year for Stryker.

Top Holdings

Ticker Security Description Portfolio Weight %

As of 3.31.2024.


It’s always difficult to predict what financial markets will do, although I think we can cautiously lay out some expectations.

The Federal Reserve has made it clear that it wants to lower interest rates sometime this year. The timing is still not clear. The Fed is also facing the fact that inflation continues to be a problem, even though it’s not as severe as it was two years ago.

Broadly speaking, the U.S. economy is holding up well. The job market continues to be healthy. This means that consumers are out there shopping, and that’s good for business. If we continue to see an improvement with inflation, then the Fed will feel more comfortable in cutting interest rates. Lower rates are almost always a benefit to equity valuations.

Overall, I remain very optimistic. No matter what the Fed does, or what happens in Washington, I expect the market to favor high-quality stocks such as those we own at CWS. This continues to be a very good environment for the AdvisorShares Focused Equity ETF.

Eddy ElfenbeinRespectfully,

Eddy Elfenbein
Crossing Wall Street
AdvisorShares Focused Equity ETF (CWS) Portfolio Strategist


Management Fee

In a first for the ETF industry, the portfolio strategist of CWS has “skin in the game.” The strategist’s compensation is directly tied to portfolio’s performance. Using the trailing 12-month returns of CWS vs. its S&P 500 Index benchmark, stronger outperformance is rewarded with a larger management fee while weaker underperformance is penalized with a smaller management fee. The CWS fulcrum fee was 0.71%, 0.65%, and 0.65% during January, February, and March 2023, respectively. After the Fund’s March performance, the CWS fulcrum fee will remain at 0.65% in April 2024.


Past Commentary


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The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.

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